Mission of Program

Gundersen’s mission is to “enhance the health and well-being of our communities while enriching every life we touch, including patients, families, and staff.” To achieve this vision, Gundersen aspires to “be the global leader in healthcare for environmental stewardship and sustainability.” Gundersen’s specific goal was to produce more power than it consumed from fossil fuel sources by 2014. A subsidiary of Gundersen, Envision LLC, was established to lead this initiative.

Overview

In addition to implementing a number of other industry leading sustainability initiatives, Gundersen recognized that achieving energy independence would require a level of investment beyond allocating available operating dollars. “You cannot reduce your way to zero” became the mantra. To finance the development of multiple renewable energy projects—all within the areas that the health system serves­—Gundersen invested approximately 5 percent of its long-term savings portfolio, about $30 million, in real assets. These resources supported the creation of two wind turbines sites (for a total of four wind turbines, two per site), a biomass boiler, a landfill gas project, two dairy manure digesters, a geothermal heat pump, and several solar projects. On average, since 2008, the rate of return on these projects has exceeded Gundersen’s rate of return for its total investment portfolio.

Organizational Investment Portfolio

Return

Cash, Treasury Bills, Bonds, Stock

5.8%

Energy Infrastructure Investment (5% of portfolio)

10-12%

By increasing local engagement and strategically deploying intellectual and economic resources, Gundersen has become a leader in environmental sustainability. Gunderson has also supported the local economy through other targeted investments and partnerships, including helping to retain a large local employer, enabling the construction of affordable housing, and cofounding a multi-stakeholder cooperative connecting local producers to institutional buyers.

Former CEO Dr. Jeff Thompson led the work to increase local engagement: “We have significant opportunity with the strength of this organization to do multiple things at the same time. Great organizations can do more than one thing at a time.”

Background

In 2008, Gundersen Health System embarked on its journey to become a leader in environmental sustainability. Energy independence would enable more affordable healthcare delivery, better patient and community health, a stronger regional economy, and a cleaner environment. Thompson explained, “We had to reframe the argument…My message to our board was: your energy supply is making people sick. If I come up with a way to decrease that pollution, save us money, and improve the local economy­—if I do all three things—are you with me?”

Program set-up

“It’s not access to capital—all health systems have the capital. It’s about prioritization,” remarked Jeff Rich, Executive Director of Envision LLC. A subsidiary of Gundersen, Envision was established to lead sustainability efforts, exercise flexibility in accessing resources, and serve as an education and consulting resource for other health systems. Envision has its own board, which includes leaders like Senior Vice President Mark Platt, two community members, and one physician. Gundersen also has a larger sustainability council to oversee additional environmental sustainability efforts.

Platt, who is also a former board member, explained the decision to utilize the health systems’ investment portfolio to achieve the goals of Envision: “It was an alternative to making other investments. Our investment portfolio is pretty conservative. We chose instead to invest in local energy projects that have a greater return and improve community health.”

“It’s not access to capital—all health systems have the capital. It’s about prioritization.”

Dedicated project staff and continuous leadership support made Envision successful. As Platt emphasized, “To say our mission is to support the communities we serve—we believe that. Jeff Rich, executive director of Envision—that’s his only job. We don’t ask a commission in their spare time to do this work. We have people dedicated to conservation, energy generation, and medical waste reduction—things that have a positive impact on the health of our community. We’ve invested in those areas, and we’ve found that those investments have very quickly paid for themselves.”

At the onset of all Envision projects, senior leadership presents to the board. Educating the board is vital to ensuring commitment in the face of challenges, such as shifts in energy prices, projects delays, and issues with permitting and state regulations. Platt explained that maintaining the board’s support has been essential to weathering these difficulties: “Not every project we started was successful. Engineering challenges tested our resolve. There were a couple instances where our CEO had to spend his leadership capital to convince the board to spend money before we received it entirely back from other projects. There were exit ramps we chose not to take. If this wasn’t tied to our mission we wouldn’t have seen it through.”

Envision also provides at-cost consulting to other hospitals, guiding them in lessons learned and helping them avoid or overcome challenges. Gundersen sees this work as benefitting the health of its patients and healthcare more broadly.

Staffing and budget

Envision has four full-time staff, including Jeff Rich, Envision’s executive director. Rich reports to Mark Platt at Gundersen, who reports to the CEO. In addition, Envision draws upon the expertise of Gundersen’s legal team and the departments of finance, marketing and communications, accounting, and external affairs. Support from senior leadership has been essential throughout.

Gundersen also has one staff person working full time on waste reduction. Even apart from the environmental benefit, Gundersen estimates that the savings gained through efficiencies easily offset the costs of this investment, saving the institution more than $500,000 since 2010.

Funding

Many of these projects have also leveraged outside resources and brought dollars into the communities that Gundersen serves, including taking advantage of state and local grants and tax incentives that were available between 2008 and 2014. As a nonprofit, Gundersen partnered with the for-profit but local and cooperatively owned Organic Valley to utilize the tax credits for one of their wind turbine investments. The second wind turbine site is jointly owned with another local for-profit company, Mathy Construction.

Key strategies employed

To achieve this audacious and historic goal, Gundersen understood that investment-as-usual was not an option. Platt shared, “We chose to look at these investments not in terms of other medical competing needs, but in comparison to how those dollars would be invested in the market.”

Support local economy through investments in local renewable energy projects

Gundersen leadership might have pursued this goal by purchasing clean energy from other communities. Instead they made the intentional decision to prioritize this investment in the local community. To do so, they considered both financial return and community impact. Rich explained, “We focused on four things: 1) making care more affordable for our patients, 2) improved community health, 3) job creation and, 4) the environment.”

Make direct equity investments in small, local, and/or diverse businesses based in the community

The case of Logistics Health Incorporated (LHI) illustrates the power of Gundersen’s direct equity investment strategy. Established in 1999, LHI is a veteran-owned local business that employs veterans and addresses critical military medical readiness concerns. LHI quickly became one of the largest employers in La Crosse. When the company needed growth capital to expand but could not find local investors, the growing likelihood was that the business would be acquired by a company that would relocate it outside of La Crosse.

To retain LHI in La Crosse, then-CEO Jeff Thompson pushed his team for a solution. Ultimately, Gundersen made an equity investment in LHI of tens of millions of dollars. Drawing on the expertise of his staff and board members—including a banker and an accountant—Thompson recalled, “We did our due diligence. We’d have to stay invested for three years and it did tie up some assets. It wasn’t a unanimous decision of the board.”

Pushback also came from some physicians who thought investment strayed too far from Gundersen’s healthcare mission. Thompson’s reply was that this was very much in line with the health system’s mission of improving the health and well-being of the patients and the communities it served. “Ten percent thought that I was crazy for doing something this risky, but it wasn’t that we went to Las Vegas and played cards with the money. This was a growing company with a strong track record and it was well-run. Turns out, we were able to sell in sixteen months, not three years. When we sold, we drove a hard bargain since we didn’t have to sell.” Gundersen set two non-negotiable conditions for the sale: remain and grow in La Crosse.

Cofound a multi-stakeholder co-op that supports the local agricultural supply chain

“We realized that pooling resources to meet standards and criteria would be the best way to bring local sustainable food into healthcare, school systems, and universities. Our role as one of the founding buyer members was important because other institutions were somewhat committed but didn’t quite know what to do. If you don’t have big institutions willing to take the lead, it is hard for some of the other entities to get on board.”

In collaboration with Vernon County, the University of Wisconsin-La Crosse, and several local school systems, Gundersen helped establish Fifth Season Co-op, a unique multi-stakeholder food cooperative connecting local growers to institutional purchasers.1A more in-depth case study of Fifth Season Co-op, produced by the United States Department of Agriculture, can be accessed in the More Resources section of the online version of this toolkit. Additionally, Fifth Season Co-op was featured in a 2013 case study written by The Democracy Collaborative: Hospitals Building Healthier Communities: Embracing the anchor mission, community-wealth.org/content/hospitals-building-healthier-communities-embracing-anchor-mission. The cooperative’s sales have grown from $40,000 in 2011 to over $500,000 in 2015.

Tom Thompson, Gundersen’s sustainability coordinator, said, “We realized that pooling resources to meet standards and criteria would be the best way to bring local sustainable food into healthcare, school systems, and universities. Our role as one of the founding buyer members was important because other institutions were somewhat committed but didn’t quite know what to do. If you don’t have big institutions willing to take the lead, it is hard for some of the other entities to get on board. We had to jump in pretty early and use some of our clout to show that leadership.”

Utilize real estate holdings to support creation of affordable housing

Another example of how Gundersen has leveraged its assets to assist with community revitalization is the development of sixty-eight units of affordable housing (out of a total of eighty-five) at Gund Brewery Lofts. Within walking distance to Gundersen’s La Crosse campus, Gund Lofts opened in 2007 in an area that the City of La Crosse is striving to redevelop. To enable development, Gundersen provided the land and the 58,000-square-foot historic Gund Brewery to a private developer, who executed construction using Low Income Housing Tax Credits and Historic Tax Credits. Platt explained, “We didn’t do the project, but we caused it to happen by providing the building and the land. We recoup that property in the future once the investor completes the deal. We have a dollar specific re-purchasing agreement. We know what we will pay for it.”

Impact

On October 14, 2014, six years after establishing the goal of 100 percent energy independence, Gundersen Health System became the first health system in the world to produce more power than it consumed.

On October 14, 2014, six years after establishing the goal of 100 percent energy independence, Gundersen Health System became the first health system in the world to produce more power than it consumed. In 2015, it had seventy-two days of energy independence and an eighty-one-day stretch of cumulative energy independence.2For this 81-day contiguous period of time, Gundersen produced more energy from renewables in total than it consumed. Gundersen estimates that its 2015 fossil fuel energy offset was 64 percent. In addition, Gundersen generated more than $3 million in revenue from energy production. Using Practice Greenhealth’s Energy Impact Calculator, Gundersen can also measure positive impacts on community health, such as reductions in asthma attacks.

Energy independence has benefitted the local economy as well. The landfill gas project generates $215,000 in annual tax revenues for La Crosse County. The biomass boiler produces additional revenue of $667,000 for regional wood chip suppliers. More than $300,000 in local wages have been created through seven new operation and maintenance technician jobs at the wind and digester projects. More, the $30 million invested in various projects by Gundersen and its many business and government partners have created new local construction jobs.

“Beyond the financial payback, there is a business value from the benefits to our reputation in the community and at the national level.”

Platt noted, “Beyond the financial payback, there is a business value from the benefits to our reputation in the community and at the national level. I was visiting the Department of Energy in Washington unrelated to Gundersen. The person I was speaking with brings up Gundersen and has a picture of us on the wall…None of our medical accomplishments get that amount of press, right or wrong.”

Dr. Jeff Thompson shared, “This is one of the things that I debate with other CEOs all the time that ask ‘how much “gold” should we store in our basement?’ Let’s instead use those savings, and the question is rather, ‘How do we go about doing that?’”

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